Think tank: Long-run deficit 'entirely due' to healthcare costs

The United States would be looking at long-term budget surpluses rather than deficits if only healthcare costs per person were on par with the rest of the world, the nonprofit Center for Economic and Policy Research demonstrates with a new online calculator.

The think tank's "Health Care Budget Deficit Calculator" allows users to change the course of the nation's fiscal outlook by swapping healthcare costs with those of other industrialized nations, all of which have longer life expectancies than the United States. Simply by adopting Australian healthcare prices, the calculator shows, the deficit would be eradicated by 2040.

"The country faces a healthcare cost crisis," the think tank said in announcing the calculator. "If it addresses this crisis, it does not have a deficit problem. If it doesn't address the healthcare cost crisis, there is no plausible way to address the problem of the deficit."

The debate over budget and economic policy is overwhelmingly focused on deficits and debt. However, the projections of explosive long-term deficits are entirely dependent on projections of exploding health care costs. If the United States had per person health care costs that were comparable to costs in other wealthy countries (all of whom enjoy comparable or better health outcomes), then we would be looking at long-term budget surpluses not deficits. The updated CEPR Health Care Budget Deficit Calculator simply and easily shows what our long term budget deficits would look like if we did not pay as much for healthcare. By allowing the user to choose the per person health care costs of other advanced nations, the calculator shows that deficits would not continue to rise uncontrollably if we did not pay as much in healthcare. At the same time, it illustrates how hard it will be to keep deficits from exploding if nothing is done to reduce healthcare costs.

As well, a new CEPR infographic compares some recently proposed budget cuts to potential savings by lowering healthcare costs, in the process showing how little effect the cuts would have. Together, the calculator and infographic make it clear that any meaningful talk of long-term budget deficits has to center on healthcare costs.

The country faces a health care cost crisis. If it addresses this crisis, it does not have a deficit problem. If it doesn’t address the health care cost crisis, there is no plausible way to address the problem of the deficit.